Perusahaan Otomobile Nasional Berhad, or PROTON, was incorporated on the 7th May 1983. Proton made a major step in upgrading its engineering capabilities when it acquired a share in Lotus Group International in October 1996 - this stake was increased to a 100% share in 2003.

Based on technology and parts from Mitsubishi, production of the first model, the Saga, began in 1985. Until the end of the 1990s, the car's logo featured the crest from Malaysia's coat of arms, featuring a crescent and a fourteen-pointed star. Proton now uses a logo featuring a stylized tiger head.

Initially the components of the car were entirely made of parts manufactured by Mistsubishi but slowly local Malaysian parts are being used as technology is transferred and skill is gained. Also, with the acquisition of Lotus technologies in 1996 from Bugatti, Proton has gained an additional source of technologically challenging parts.

By 2002 Proton held a market share of over 60 per cent in Malaysia, which was reduced to 40 percent by 2004 and is expected to reduce further in 2008 when AFTA mandates reduce import tariffs to a maximum of 5%. Proton has operations in the United Kingdom and Australia and is aggressively marketing their cars in several other countries.

In December 2004, Proton purchased a majority share in MV Agusta of Italy. MV Agusta is the manufacturer of MV Agusta, Husqvarna, and Cagiva motorcycles. Proton is listed on the Bursa Malaysia.

The first Proton car model, Proton Saga, rolled off the assembly line in Shah Alam in September 1985. The 100,000th Proton Saga was produced in January 1989.

In 1993, a model called Proton Wira was introduced based on the Mitsubishi Lancer/Colt. More than 220,000 units were sold between 1996 and 1998 [2]. Proton Perdana based on the Mitsubishi Eterna, was first produced in 1994, intended for higher end market. Proton Waja is the first car model designed internally by Proton. It is called Proton Impian in the UK market. The second generation, replacement model for Proton Wira is called Proton Gen-2. It was launched on February 8, 2004. On June 8, 2005 Proton introduced a 1,200 cc, 5-door compact car called the Proton Savvy.

In October 2004, Proton announced that an understanding has been reached with Volkswagen AG of Germany to establish a strategic partnership. Under the tie-up, the two carmakers are expected to exploit each other's strengths. Proton would gain access to Volkswagen's superior technical capabilities and technology. In return, Volkswagen may utilise Proton's spare capacity at the latter's Tanjung Malim to assemble cars for export to the South-East Asian market, where the German auto giant has a weak presence. Furthermore, the tie-up may see Volkswagen assist in distributing Proton vehicles in China while Proton does the same for Volkswagen in South-East Asia. Nonetheless, at this juncture both parties have yet to announce detailed and concrete plans for the partnership.

The company first began exports to other right hand drive markets like New Zealand and Ireland in the late 1980s, but it was much more successful in the United Kingdom where it was introduced in 1989. Advertised with the slogan Japanese Technology, Malaysian Style, Proton cars proved popular among budget-oriented motorists, and like Japanese and South Korean models before them, led to the demise of Eastern-bloc manufacturers such as Lada and Zastava. By the 1990s, Proton had already withdrawn from the New Zealand market after offering only the Saga four-door and Persona five-door models.

Proton also exports cars to countries in Southeast Asia and Australia, and now produces models in left hand drive, for export to continental Europe. An entry into the US market was considered, following Hyundai's successful launch in the mid 1980s. However, exports to the US never materialised, as the cars required hundreds of changes to meet American safety standards.

It is a company that can be used as a case study for rent seeking as tariffs on imported cars rose almost immediately following the formation of Proton. Also AFTA agreements on relaxing entries into the ASEAN marketspace had exemptions specifically for Proton. The Malaysian government gained a three year exemption for Proton from 2002 to 2005 where entry tariffs had to be lowered to 5%.